Though often overlooked, the trucking industry is really important to the health belonging to the US economy. Think about it: without truck drivers delivering goods, interstate commerce would grind to a screeching, tire-burning halt.
Unique Challenges
Despite the importance of trucking companies, the way the system is structured often leaves them in a shaky financial position. Truck companies submit invoices for services rendered, and then often wait 30-90 days for payment on the accounts receivables.
For a bigger company with large cash reserves, waiting to be paid would not be a problem. But for small to mid-size companies operating on a strict budget, it might ‘t be an option. Expenses such as payroll and gas add up in the time between payment, and not paying your drivers is never a good business approach. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and is definitely a recipe for financial hardship.
Therefore, trucking companies often have flip to outside borrowing. The following are some strategies to trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to carpet by which businesses sell their accounts receivables to a factoring company. Approval for factoring primarily based on the creditworthiness of the trucking company’s customers.
At the time of the sale, the client gets 80-90% of this cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a share fee that typically ranges from 1-5%.
This choices are best for B2B businesses that cannot manage to wait for payment, and the cost is frequently 4-5% monthly with an impressive annual pace typically between 18-30%.
Bank Loans
Though tough to come by, bank loans are often the cheapest way of financing. The money process involves an application and analysis of the company’s creditworthiness and financial track record. Small companies especially tend to be thrown to the wolves for loans, although exceptions do exist.
After approval, fund disbursement usually takes about 30-90 days to achieve a trucking company’s savings. This form of funding greatest for for trucking outfits with a great credit ratings and don’t want the money immediately.
Cash-Advances
Cash advances take place when a company receives a loan sum from the lender. Business pays financial institution back with percentages of their monthly card receipts until the loan (plus a predetermined rate) is repaid. Happen to be legal limits to the rates, and they cannot be changed retroactively. The benefit to cash advances is immediate cash- occasion the fastest method for obtaining cash without likely to a loan shark.
This financing method is best for trucking companies who need immediate cash for a short amount of this time and have limited financing options. Costly is usually 20% if not more.
Lease-Back
A trucking company may want to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It very best for trucking companies with valuable plant or equipment assets which might be underutilized, and also the cost is monthly lease payments plus the depreciation and tax burdens of tools.
Choices, Choices
Every trucking company is unique, and it is nearly them to find funding solutions that meet their individual needs. Being informed on all the choices is begin step toward finding a worthwhile cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444